The
case for the “open society” and the role the WTO plays

It
is a pleasure to be with you and to share some thoughts about the open
society and to explain the role the WTO can play in building a more
secure, stable, predictable economic system from which civilised
people, working families, businesspeople, investors can prosper — a
system of agreed rules by governments and parliaments, not force. The
law is the great equalizer, whether that law be local or
international.

There
is no international institution less understood, more demonized than
the World Trade Organization. According to some of the propaganda that
I have read, I am one of the most powerful men in the world. Alas,
that's not so.

A
little history. The great depression was made deeper, prolonged and
more lethal because of protectionist measures by governments who
scrambled in panic to save, as they saw it, their economic skins. The
great depression helped give rise to the twin tyrannies of our age —
fascism and marxism. Thus the hot and cold war. The most terrible war
in human history and the most wasteful misallocation of resources in
the human experience. The vicious and ungracious Versailles agreement
after the Second World War gave way to the most generous and visionary
idea in history, the mirror opposite of Versailles. The Marshall plan,
where the victors decided to rebuild the vanquished and to integrate a
broken Europe into a new world economy. It worked. A peaceful Europe
is a force for good, and that economic union is still at work,
extending to a wider Europe.

The
same principle of open society and open markets worked so that Japan
is now a force for good, a great nation, a great exporter and a great
importer. Tens of thousands of jobs in Australia rest on Japan's
success. How did this happen?

Even
before the War ended, leaders determined this tragedy must not happen
again. The world needed an international architecture to protect it.
The United Nations was born to handle political matters, the World
Bank to finance and assist development, the International Monetary
Fund to handle macro-economic issues and financial liquidity issues,
and finally, the General Agreement on Tariffs and Trade — the GATT,
which only recently became the WTO, with binding rules and procedures.

Too
much of this century was marked by force and coercion. Our dream must
be a world managed by persuasion, the rule of law, the settlement of
differences peacefully within the law and cooperation. It is a good
thing that all our living standards are now based on the ability of
our neighbours to purchase our products. That's where the WTO can do
splendid work and advance the progress of the human species.

Governments
own the WTO, we don't own them. We have 140 members. We operate by
consensus, there is no security. Our agreements must be ratified by
sovereigns, parliaments and congresses.

So
why the controversy? In the absence of an “ism” to hate,
globalization is now the target. But globalization, that terrible
word, is not new. It is not a policy or a plan or a conspiracy worked
out in secret and implemented by a cabal of the rich. It is a process
that started when the first person stood upright and walked out of a
cave and exchanged products. Many economists and historians argue that
trade as a percentage of GNP was higher before the First World War
that it is now and that there was certainly a greater movement of
people then than now.

Technology,
information and financial flows have accelerated this process. The
great difference is that everyone can see and understand what is
happening. There is a debate and that is a good thing. Too often,
people confuse technological change with globalization and some even
think that if there were no WTO there would be no globalization.

History
shows how we moved from hunter-gatherers, to agricultural, then feudal
and industrial society. Now we are in the post-industrial age. Each of
these great cycles of historic economic development was marked by
turmoil, unrest, hatred of leaders, a phase of discontent, even
revolution. I believe these movements are for the better, at least for
most people. Liberty and living standards have advanced. Technology
has advanced our species. In the 1960s India and China were faced with
frequent famines. Then came a science-driven green revolution. The
author of blessings such as super rice and super wheat got the
Nöbel prize for peace. Now he would be met with protest. In open and
democratic societies, where ideas must be tested, where we operate in
a transparent way, science is our best friend. Everyone is a globalist
when their child is sick. They want the best medicine the world can offer. Look
at how costs relative to income have dropped over time. 125 years ago,
it took a week's work for a Kiwi to put one word in a cable to London.
Now the children of the unemployed or widows can e-mail or chat
anywhere for almost nothing. In the 1950s it took a year's wages to
pay for the Encyclopaedia Britannica. Now it's on the internet.

Anti-globalization
groups such as E.Hippies, Anti-globalisation.dot.com, miss the
splendid irony in such titles. Ideas must travel, that is what
education is all about. The most globalized of all our activities down
the ages have been in our universities and in the arts. However, ideas
must be rationally tested. Protest and questioning is part of
progress, that in fact is the basis of Karl Popper's proposals in his
work the “Open Society and its Enemies”. That is why freedom, both
economic and political, returns superior results. The democracy of the
market-place, with millions of consumers making decisions, with
products being tested in the market-place, is as important as a
political market-place. It allows for perpetual improvement. That is
why open societies do better. That is the principle of the Open
Society, a society that tests itself, open to improvement. That is why
it is more successful than closed societies that deny their
imperfections and cover up their failures. That is why in the last 50
years open societies have advanced, and so have living standards. As
living standards go up, so does the demand for better human rights and
environmental standards. An educated people demands it.

There
is overwhelming evidence that trade boosts economic growth. Just
compare the protectionist nightmare of the 1930s with the long boom in
America and Europe as trade barriers fell in the 1950s and 1960s. Or
read the famous study by Jeffrey Sachs and Andrew Warner of Harvard
University, which finds that developing countries with open economies
grew by 4.5% a year in the 1970s and 1980s while those with closed
economies grew by 0.7% a year. At that rate, open economies double in
size every 16 years, while closed ones must wait a hundred. Or cast an
eye on the countless country studies that support their results.

It
is not just Wall Street traders, management gurus and international
civil servants like myself who gain from globalization. It is also
everyone with a pension who enjoys a more comfortable retirement
because their savings are more fruitfully invested abroad, as well as
everyone abroad who benefits from that foreign investment. It is
people in Britain who can talk on Finnish mobile phones, use Japanese
cameras, drive American cars, drink Colombian coffee and wear clothes
made in Asia. It is poor people everywhere who can buy cheaper food
and clothes produced abroad. It is Indian computer programmers who can
sell their services to American companies, and earn enough to give
their children a good education and decent health care. And it is poor
people in poor countries who are grasping the opportunities provided
by trade and technology to try to better their lives. Mexican farm
hands who pick fruit in California, Bangladeshi seamstresses who make
clothes for Europeans, and South African phone-shop owners who hawk
time on mobile phones to their fellow township dwellers. They and
countless other real people everywhere are the human face of
globalization.

It
is true that, in general, living standards in poor countries are not
catching up with rich ones. It is a tragedy that 1.2 billion people
— almost a quarter of the world's population — survive on less
than US$1 a day and that a further 1.6 billion make do with between
US$1 and US$2 a day. Reducing such extreme poverty must be a priority.
Of course, it is easier said than done. But we can learn from the
example of those developing countries that are catching up with rich
ones. Take South Korea. Thirty years ago, it was as poor as Ghana;
now, it is as rich as Portugal. Or consider China, where 100 million
people have escaped from extreme poverty over the past decade. What do
these fortunate countries have in common? Openness to trade and ideas.

The
bottom line is this: the developing countries that are catching up
with rich ones are those that are open to trade; and the more open
they are, the faster they are converging. That is particularly good
news for China. The liberalization that joining the WTO requires will
give another big boost to Chinese living standards.

Lee
Kuan Yew had this to say about the WTO:

“Through
the WTO, the Chinese economy can become integrated into the rest of
the world. When the Chinese livelihood is interdependent with that of
the world through trade, investment, tourism and the exchange of
technology and knowledge, there will be a better basis for a stable
world”.

But
trade alone is not enough to eradicate poverty. For instance,
abolishing trade barriers will not help much if countries are at war
and farmers cannot get their crops to market or if nations are
crippled by debt, or an AIDS epidemic, or bad governments. But freer
trade is essential if poor people are to have any hope of a brighter
future. Those societies that have produced the worst results are those
that do not treasure trade, honest and open governments, the rule of
law and freedom. Amartya Sen won his Nöbel prize by his studies that
showed economic and political freedom were linked to development. Sen
writes that: “Freedom is at once the ultimate goal of social and
economic arrangements and the most efficient means of realizing
general welfare. Social institutions like markets, political
parties, legislatures, the judiciary and the media contribute to
development by enhancing individual freedom and are in turn sustained
by social values. Values, initiatives, development and freedom are
closely interrelated”.

Critics
of free trade argue that poor people within a country lose out when it
liberalizes. This is where the government has a crucial role to play.
It must distribute the benefits of trade. Of course, in the short
term, some people do lose from globalization. As trade barriers fall,
foreign competition forces domestic firms to specialize in what they
do best, rather than making goods which are more efficiently produced
elsewhere. Those who are no longer gainfully employed have to find new
jobs. Poor farmers who lose their subsidies or unskilled workers who
lose their jobs need time to find new employment. Their plight must
not be forgotten. But their hardship, like that of anyone who loses
their job, should be eased with welfare benefits and job retraining,
not by putting a halt to liberalization and economic reform. The
temporary losses of a few should not prevent a country from reaping
the much bigger — and permanent — gains from trade. After all, the
interests of candle makers were not allowed to stop the introduction
of electricity. Nor are governments scrambling to stop the Internet
from cutting out middlemen. Freeing trade, like new technology, causes
change. That is how it boosts economic growth. Some of us lose at
first, but eventually we all gain.

There
are many reasons why the lucky country Australia is so successful. But
surely one of the main ones is its greater openness to trade. In 1990,
Australia's exports came to 39 billion US dollars. Last year, they
were an estimated $69 billion. Ten years ago, imports came to 39
billion US dollars. Now they are put at $77 billion. Total trade,
exports plus imports, now accounts for over two-fifths of the economy.
A decade ago, it accounted for only a third or so.

Accessions
are one of our priorities for 2001. China is almost done. Thirty other
countries are knocking on the door. They include large nations such as
Russia to smaller nations such as Vanuatu, Viet Nam and, recently,
Yugoslavia who sees membership of the WTO as part of its wider
democratic strategy.

Another
priority is to launch a new round of multilateral trade negotiations.
I am glad to say that Australia has been in the forefront of efforts
to launch a new round. Your minister, Mark Vaile, loudly beats the
drum for freer trade. He is right to do so. Halving trade barriers
around the world would add over 380 billion US dollars a year to the
world economy, according to a study by the Tinbergen Institute.

Australia
has many interests in a new trade round. Lower industrial tariffs
would boost manufacturing exports. Services liberalization would help
new-economy companies blossom. But perhaps the biggest gains could
come in agriculture. Farming is one of Australia's greatest strengths.
Hence the need for further negotiations.

We
must not forget that if the big guys are not doing well, neither will
the small guys. We need the US, Japan and Europe growing strongly and
keeping their markets open.

But
although it's not politically correct to say so, the big guys also
need new markets to ward off protectionist pressures at home. The use
of anti-dumping and countervailing duties is soaring, threatening the
gains from past liberalization. Producer support estimates for
agriculture are rising again, according to the OECD. The siren voices
of protectionism beckon.

Leaders
and ministers have a far more difficult job than in my day. Special
interest groups are better mobilized. However, in Geneva work is
progressing on all fronts, we are in serious negotiations on our
mandated agenda, agriculture and services, two thirds of the world's
economy. We have groups working at various levels of intensity on
investment, industrial tariffs, trade facilitation, transparency in
government purchasing, competition policy and wrestling on social
issues. The key area of implementation, which covers the difficulty
developing countries have with existing agreements, has been the
subject of intensive negotiation, with only modest results. We have a
package through on market access for least-developed countries, where
over 20 countries have indicated support.

We
have worked harder on inter-agency cooperation with our partners in
the World Bank, the IMF, UNCTAD and UNDP, to get up and work on an
integrated framework to assist LDCs.

We
have reached out with new programmes and new technology to the 30
nations, too small, too poor to have missions in Geneva. The most
marginalized, our non-residents. We know the opportunities are immense
for all.

I
am haunted by the studies that show OECD subsidies are greater than
the total GNP of Africa. Abolishing these subsidies would
represent a return to developing countries of three times all the
total ODA put together. These are goals and opportunities worth
fighting for.

Can
I finish with a quiz. Guess who said this of the WTO:

“We
are firmly of the belief that the existence of the GATT, and now the
World Trade Organization, as a rules-based system provides the
foundation on which our deliberations can build in order to improve
… As we enter the new millennium, let us forge a partnership for
development through trade and investment0.Nelson Mandela

“No
nation, big or small, can be left out of this important institution,
nor should it … We should turn this organization into an instrument
of the struggle for a more just and better world”.Fidel Castro

“Globalization
is not a policy choice — it is a fact”.Bill Clinton

“The
evidence is overwhelmingly persuasive that the massive increase in
world competition - a consequence of broadening trade flows - has
fostered markedly higher standards of living for almost all countries
that have participated in cross-border trade”.Alan Greenspan

Ladies
and Gentlemen, I am not arguing that in our imperfect world there is
no need for change, adjustment or reform of our global architecture,
or that the WTO does not need to adapt nor improve. But I will say the
world would be a more dangerous, less stable place and Australia less
prosperous without it.